Accounting

Is the value of inventory accurate before a full physical count?

Is estimation of the value of inventory accurate before a full physical count?

A full physical count will certainly provide an accurate picture of what is on hand provided appropriate procedures are put in place.

However, an accurate count may not provide an accurate picture of the value of inventory owned by the entity at reporting date due to:

  • inadequate cut-off procedures
  • goods in transit
  • consignment arrangements
  • damaged or obsolete items
  • inaccurate prices
  • inadequate reconciliation of count to accounting records
  • net realizable values below cost.

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